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October 25, 2009

Signs point to guilty, says IC

Two Price Waterhouse firms, four Price Waterhouse Bangalore auditors and two former Satyam Computer Services employees have been found prima facie guilty of professional misconduct by India’s accounting regulator.

The Institute of Chartered Accountants in India’s (ICAI) disciplinary committee has agreed with the ICAI director of discipline’s findings that these parties were guilty.

The disciplinary committee found Price Waterhouse Kolkata and Price Waterhouse New Delhi prima facie guilty of professional misconduct. The Price Waterhouse firms are all independently registered with the ICAI. Price Waterhouse Bangalore was Satyam’s external audit firm.

The institute has been investigating the accounting profession’s involvement in Satyam since an INR7 billion ($1.43 billion) fraud at the software company was revealed in January this year.

Soon after the fraud was revealed, the ICAI issued show-cause notices to Price Waterhouse in Bangalore, New Delhi and Kolkata.

According to Indian media reports, Price Waterhouse Bangalore named four answerable members: S Gopalakrishnan and Srinivas Talluri, who were the former auditors of Satyam; P Siva Prasad, who was the head of the audit team; and audit team member Ch Ravindranath.

The firms in New Delhi and Kolkata replied that they were not the auditors of Satyam and, therefore, not answerable to the allegations.

The four auditors named by Price Waterhouse Bangalore have all been found prima facie guilty by the ICAI.

Gopalakrishnan and Talluri signed Satyam’s audit reports between 2000 and 2008. Both were found prima facie guilty for failing to carry out statutory audit and for not qualifying the reports to say the financial statements did not give a true and fair view of the affairs of the company.

The two Satyam staff members found guilty were internal audit leader VS Prabhakara Rao and chief financial officer V Srinivasu. Gopalakrishnan, Talluri and Srinivasu are all currently being held in prison. The ICAI has issued notices to all the respondents; written replies must be submitted within 30 days.

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